A rising tide of deal making in Europe's troubled telecom sector is spurring more companies to dip their toes in the water, raising hopes for a long-awaited wave of consolidation.

With Telefónica SA's agreement last week to buy the German mobile-phone unit of Dutch telecom company Royal KPN NV in a deal worth €8.1 billion ($10.6 billion), the value of European mergers and acquisitions in the telecom sector has hit a more than...